The Khan Committee was a committee appointed by the Reserve Bank of India (RBI) in 2016 to review the working of the monetary policy framework in India. The committee was chaired by Dr. Urjit Patel, who was the Deputy Governor of the RBI at the time, and was also known as the Patel Committee.
The key recommendations of the Khan Committee were:
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Adoption of flexible inflation targeting: The committee recommended adopting a flexible inflation targeting framework in India, with a target of 4% inflation within a band of +/- 2%.
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Establishment of a Monetary Policy Committee (MPC): The committee recommended the establishment of an MPC, with a majority of members appointed by the government and the RBI, to decide on monetary policy.
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Publication of Monetary Policy Report: The committee recommended the publication of a Monetary Policy Report by the RBI, which would provide a comprehensive assessment of the macroeconomic and financial conditions and the outlook for inflation.
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Strengthening of monetary transmission: The committee recommended measures to strengthen the transmission of monetary policy, including greater transparency in the pricing of loans and deposits, and the development of a liquid and deep market for government securities.
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Review of the liquidity framework: The committee recommended a review of the liquidity framework to ensure that the RBI has adequate instruments and tools to manage liquidity in the financial system.
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Development of financial markets: The committee recommended measures to develop financial markets, including the introduction of new financial products and the promotion of competition and innovation.
The recommendations of the Khan Committee were accepted by the government and the RBI, and many of them have been implemented over the years. The adoption of flexible inflation targeting and the establishment of the MPC have been seen as major reforms in the Indian monetary policy framework.
